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National is preparing for immigration to become a major election issue.

Prime Minister John Key said it would be "ill-informed" to blame immigrants for strain on house prices in Auckland.

And Immigration Minister Michael Woodhouse said National had to be confident at next year's election countering "thinly-veiled xenophobic rhetoric" from New Zealand First leader Winston Peters and from Labour.

Permanent residency approvals were higher under Labour than under National and were at the highest when Mr Peters was supporting the Labour Government.

Both were commenting at the National Party conference in Christchurch.

Mr Key said having too many people was a better problem than eight years ago when too many people were leaving the country.

Last week Statistics New Zealand reported an unemployment rate of 5.2 per cent and some employers were starting to see skill shortages.

"When you talk about having the component parts to grow a strong economy, you don't just need good physical infrastructure; you need the people to do that," he said.

"If you break it all down, which bits would you want to stop? Certainly not returning Kiwis or Australians; certainly not people we educate that we make money out of; certainly not holiday-makers who come as part of a working holiday programme."